The Chinese And Swiss Auctions


Auction styles are so much more around the world, being developed specifically for the area or region   Often the particular needs of an industry or culture can play a big part in how auctions are run.  Here are just a couple of examples of just such auctions.

The Chinese Auction

A Chinese auction is a type of auction (actually a hybrid of an auction and a raffle) that is commonly seen at charity or other fundraising events. Bidders in a Chinese auction are not prospective buyers (as in the conventional English auction). Instead, they purchase tickets, which are basically chances to win prizes. Bidders may purchase as many tickets as they wish and bid on any item(s) they desire by placing them in a basket or other container in front of the item(s) they wish to win. The winning ticket is drawn from the tickets bid on each item at the end of bidding, and the item is awarded to the owner of that ticket. A bidder can improve his or her chances of winning by purchasing and bidding on more tickets for a specific item. Although there is no general limit to the number of tickets a single person may bid on a specific item, the chance of winning is determined by the total number of tickets bid by all individuals.

It is unclear whether this type of auction originated in China; it is far more likely that the term comes from “chance auction,” another name for this type of auction. The Chinese auction is similar to the silent auction in that bidders submit bids listing specific amounts that they are willing to pay for a specific item, whereas in the silent auction bidders submit bids listing specific amounts that they are willing to pay for a specific item.

Chinese auctions have grown in popularity on the Internet, with numerous websites offering a wide range of items for sale.

The Swiss Auction

In Switzerland, contracts are typically awarded through a first-price sealed bid auction format (Von Ungern-Sternberg, 1991). If the winning bidder does not want to accept the project, they can withdraw their bid and thus refuse the contract. Sellers prefer this format because it is practical for their industry. For example, job-specific timetables and specifications may not be fully known until the auction is completed; therefore, contractors must be given the option to decline the contract if they do not believe they can meet the seller’s conditions. Furthermore, contractors frequently bid on multiple contracts at the same time, which can affect timing, cost overruns, and labor and equipment availability if they are awarded more than one project at a time. As a result, it is in the seller’s best interest to allow “winning” contractors to withdraw if they do not believe they can meet contract specifications.

This auction format lends itself to collusion. For example, the highest bidder could collude with the second highest bidder by offering to withdraw for a certain amount of money (i.e., a kickback paid to the highest bidder by the second highest bidder in exchange for declining the contract).

As a result, the auctioneer has some leeway in dealing with this possibility; in this case, the auctioneer could force the “winning” company to meet its bid and honor the contract.

In Summary

So there you have it!  Two very different styles of auctions from around the world.  Keep in mind, though that, as the world gets smaller, these types of auctions are bound to merge and form hybrid styles of auctions.  The auction world just continues to grow and evolve.

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